The Price is Right
You’ve made your product, you’ve nailed your branding, and you’re ready to start selling, but just how much should you be selling your creations for? In theory, pricing your product should be one of the simplest parts of setting up and launching your small business. You tap a series of numbers and symbols into your calculator, hit the “equals” button, and there’s the selling price, right? Well, as I said, that is how it works, in theory. But determining the monetary value of your product can be quite an emotional process. There are a few different formulas you can use to find your margin and selling price, and they are all magically revealed after a quick Google search. I’m here to talk about the parts of the equation that aren’t reflected in those cold, hard numbers.
You have worked for months, or sometimes years to develop your product. You’ve poured your heart and soul into creating something that you care enough about to share with other people. And you know that there may have been times when it didn’t seem worth it, when you were sat in your spare-room-turned-studio at 3am surrounded by drill bits, your fingers superglued together, wondering if Louis Vuitton ever ugly-cried over his handbags in the 1850s like you’re doing right now. (I’m sure he did) So there’s no way you’re going to sell your hard-won creation for anything less than the right price.
KNOWING YOUR BRAND
A really important aspect of determining your price point should be knowing your brand - knowing who you are, what your product is (duh!) and, most importantly, who your customer is. Because your customer might not be… you. It’s a difficult thing to consider, but your customer might have a wildly different bank balance and spending habits to you. They might be in a very lucrative corporate role, for example, while you’re investing every last penny into your business and your cash flow is slower than a snail in treacle. And this is so important to consider when your product is on the more expensive side. Once you’ve done your calculations, if you’ve landed on a potential selling price that feels a little bit out of your financial reach, do not let guilt creep in and do not start mentally apologising for asking people for money in exchange for your product. There are people who have that money and want your product - they are out there!
In spring of 2022, Chanel increased the price of their Classic handbags for the 4th quarter in a row. According to The Handbag Clinic, the Chanel Classic handbag now costs 71% more than it did pre-pandemic. This increases desirability, exclusivity, and reaffirms the iconic Chanel handbag’s luxury status. Chanel, Louis Vuitton, Hermes - all stalwarts of the luxury handbag market, and they are all increasing their prices year on year. They are all watching each other more closely than my dog watches his food bowl just before breakfast. So look for your competitors. Is your product more likely to be an impulse buy, or a carefully considered purchase? Find a product that is similar to yours. Or, if you are struggling to find your closest competitors, find your peers. A small brand with a similar aesthetic, similar values, with an aligned product offering and a similar price point to yours (for example, a dress brand, if you are a handbag brand; or a handbag brand, if you are a shoe brand). Position yourself within that market, and that should help you stick with your selling price.
We don’t spend hours dreaming up products and making our special dreams into a beautiful reality for it all to lose steam 6 months down the road when we sell all of our handmade crochet nipple warmers at Aunty Margaret’s WI market for 20p each. Even if there are aspects of our businesses that are not zero waste or 100% sustainable, we can still embrace the economic pillar of sustainability and build a business that is going to be financially viable and longlasting.
As someone who is old enough to remember when ASOS was called As Seen On Screen, I spent most of my twenties fawning over every single Kate Moss x Topshop collection and singlehandedly kept Zara and New Look in business. Now, like a lot of millennials, my goal is to buy less and buy better, and I love to save up for that special dress or item. The items I save up for are produced by small businesses that are run by the makers themselves. They are producing garments and items in small batches, and making to order. And they (and we) know that small scale products are expensive to produce. Scaling up production and migrating it to an overseas factory would definitely lower the cost price of almost every single item, but that is not what we do. And it is not what people want. So of course our products are going to cost more than high street alternatives.
"Now, like a lot of millennials, my goal is to buy less and buy better, and I love to save up for that special dress or item" Joanna Taylor, Founder of Bruce Label
Vogue has reported that millennials and Gen Zers are looking to purchase more sustainable products. However, the fast fashion market is still growing, thanks to the downturn in disposable incomes as a result of the increased cost of simply living in this expensive time we call 2022. It doesn’t take a genius to see that no matter where they live, the garment worker who made a £5 dress is not getting paid enough. Your product price needs to include your cost of labour at a rate that is appropriate to you - a rate that allows your business to be sustainable. If you are working on your business part time but want to make this your full time career, scale up your current output and potential sales revenue to 47 weeks of the year (to allow for 5 weeks of holiday) to see if your labour costs (and any profits you extract from the business) are translating to a salary that would allow you afford the life you currently live, and to continue to run the business for years to come. If you would be happy and able to work in a 9-5 job on that salary, then your business is financially sustainable. If that salary is less than what the Tories pay their interns (hint - nothing), then you should consider increasing your prices.
"Your product price needs to include your cost of labour at a rate that is appropriate to you - a rate that allows your business to be sustainable"
It can feel very final, announcing your price points to all and sundry, but you don’t always have to stick with your first price. Being flexible can be good for business. If you are not a well established brand, and you have the (privilege, let’s be honest) and capacity to be flexible with your prices, then I would encourage you to experiment. Just not too much! And make sure that your prices are consistent across all of your sales platforms. The beauty of running a small business is that we are not a high street store beholden to a fast fashion overlord. We are pricing ninjas, and we can take the time to find what works for us all individually. I recently added a smaller handbag to my range, as I wanted potential customers to have a more affordable buy-in point. My reasoning was that the brand was less than 3 months old, I had sold less than a handful of bags, and I was worried that my prices were too high (even though they weren’t). So by creating a smaller and cheaper bag, customers would have a way of shopping with me that would hopefully lead to them investing in more in the business further down the line. I decided to take it one step further, as I knew the product needed some refining, and lowered the price to just below cost price, at a round £50. This bag is my loss leader. It allows me to have a small income so that I can continue to buy the equipment and tools I need to refine and improve the 3 bag shapes I currently make. It’s not forever, and it’s not something I’d recommend to everyone. I’m lucky enough to still have my day job, so my income is not 100% reliant on my business at the moment. But having this flexibility has definitely allowed my business to grow.
“5 things to know about me” style posts are very popular with both makers and audiences. We love it when creators are honest and allow us a glimpse into their lives and the personality behind the brand, and knowing the story behind you and your product can increase your customer’s trust and add enormously to your product’s value. It’s the difference between “a chair made from an antique door” and “a chair made from the door that Rose was lying on when she watched Jack drown when the Titanic sank in 1912”. Telling the story of your product will help to affirm its value to your customer. I’ve also found that being honest with my customers about how I’ve priced the product, the quality of the product they are buying, and my intentions to grow and develop the business have also helped me. It feels a bit like crossing the fourth wall - the actor is talking to the audience in the theatre. But it doesn’t have to be as cringe as that. Just reveal what you are comfortable with, if that’s something you want to do. For example, I’d never reveal that my dog likes to lick my feet, and that I find a modicum of pleasure in him doing so.
I hope this blog post has emboldened you to price your products in a way that better serves you and your business!
This post was written by Joanna Taylor, the founder and owner of Bruce Label